Turning Medicaid into a Competing Health Plan

In my previous blog post and in my book Priceless: Curing the Healthcare Crisis, I make the case for abolishing Medicaid altogether. If this proposal turns out to be too radical for the body politic, my second suggestion is to keep Medicaid in its current form and let everybody enroll in it, regardless of income or assets. If it is good to let low-income families choose between Medicaid and competing private health insurance plans, why isn’t it even better to let every family make this choice? Put differently, why should Medicaid be only for poor people? Why not open it up to everyone?

The price of admission to Medicaid would be a refundable health insurance tax credit offered to every American. At the same time, everyone now in Medicaid could get out of it and enroll in private health insurance instead. The means of transfer would be a refundable tax credit, which for those exiting Medicaid would apply to private insurance. This idea would simply turn Medicaid into one more competing health insurance plan.

My reform concept envisions the government making a commitment of, say, $8,000 to a family of four in the form of a refundable tax credit. The tax credit would apply to any health plan the family chooses, including Medicaid. Federal money (federal dollars) would follow people and flow to the plans they prefer. At least for noninstitutionalized patients, there would be a level playing field on which Medicaid would compete with every qualified plan in the market.

There are several advantages to this approach. First, with no income and asset test, we immediately solve the problem of discontinuity of care—under which people become eligible, ineligible, and eligible again as their income rises and falls. Under this proposal, they could join Medicaid and stay there, regardless of income changes.

Second, it would allow low-income families to replace non-price rationing under Medicaid with the ability to pay market prices that many private plans allow. Non-price barriers to care are a greater deterrent to care than price barriers for many low-income patients. Access to private plans should increase access to care.

Third, this reform takes us closer to the goal of genuinely universal healthcare. Instead of being segregated into an inferior heath care system, low-income families would have the opportunity to participate in the same system everyone else uses.

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